EXPERT POLITICAL RISK OPINIONS AND BANKING SYSTEM RETURNS EXPERT POLITICAL RISK OPINIONS AND BANKING SYSTEM RETURNS

2007 ◽  
Vol 5 (1) ◽  
Author(s):  
John Simpson
Keyword(s):  
Stock Returns ◽  
Human Behavior ◽  
Banking System ◽  
Political Risk ◽  
Market Model ◽  
Risk Scores ◽  
International Banking ◽  
Regulatory Capital ◽  
Banking Systems ◽  
Social And Cultural Factors

Human behavior in banking and financial systems is in part made up of a complex mix of political, social and cultural factors. These factors are reflected in expert opinion based political risk scores. Market inefficiency is largely a result of anomalies in human behavior causing information asymmetries. A basic systemic market model is re-specified into a model for international banking systems, which controls for pure political risk. Samples of developed and developing banking systems are examined. Political risk factors and world banking returns are exogenous in models of countrybanking system returns. New political information assists in explaining banking system stock returns. The findings should be of interest to investors in banking stocks. Banking regulators may be assisted in decisions on appropriate levels of regulatory capital as a benchmark for banking systems. The model could help to anticipate financial crises.

Benchmarking and crosschecking international banking economic and regulatory capital

2005 ◽  
Vol 13 (1) ◽  
pp. 65-79 ◽  
Author(s):  
John L. Simpson ◽  
John Evans
Keyword(s):  
Banking System ◽  
Performance Model ◽  
Capital Adequacy ◽  
Future Research ◽  
Informational Efficiency ◽  
International Banking ◽  
Regulatory Capital ◽  
Loan Loss ◽  
Banking Systems ◽  
Loan Loss Provisions

The purpose of this paper is to provide banking regulators with another tool to crosscheck the appropriateness and consistency of levels of capital adequacy for banks. The process begins by examining banking systems and focuses on market risks and the systemic risks associated with growing global economic integration and associated systemic interdependence. The model provides benchmarks for economic and regulatory capital for international banking systems using country, regional and global stock‐market generated price index returns data. The benchmarks can then be translated to crosschecking capital levels for banks within those systems. For analytical purposes systems are assumed to possess a degree of informational efficiency and credit, liquidity and operational risks are held constant or at least assumed to be covered in loan loss provisions. An empirical study is included that demonstrates how market risk and systemic risk can be accounted for in a benchmark banking system performance model. Full testing of the model is left for future research. The paper merely proposes that such an approach is feasible and useful and it is in no way intended to be a replacement for the current Basel Accord.

scholarly journals The Usefulness of Regulatory Capital for Investors’ Judgments in the Basel 3 Framework

2018 ◽  
Vol 13 (6) ◽  
pp. 72
Author(s):  
Alessandro Mechelli ◽  
Vincenzo Sforza ◽  
Alessandra Stefanoni ◽  
Riccardo Cimini
Keyword(s):  
Value Relevance ◽  
Banking System ◽  
Investment Strategies ◽  
International Banking ◽  
Regulatory Capital ◽  
Market Risks ◽  
Economic Decisions ◽  
Risk Sensitive ◽  
The Stability ◽  
European Stock Markets

Value relevance studies assess how well accounting amounts reflect the market information that investors use for their economic decisions. Analysing a sample of 90 banks listed in 24 European stock markets, this study uses a price model (Ohlson, 1995) and provides evidence that a risk-sensitive metric like regulatory capital is more useful for investors’ decisions than book value of equity and that investors price the parts of regulatory capital that are devoted ideally to absorb losses differently due to the different risks taken. In particular, the part devoted to absorb losses due to credit risk is priced higher than the parts devoted to absorb other risks (e.g. market risks, operational risk). According to our evidence, this is due to the business model of the entities analysed, which are mostly retail and wholesale banks with significant credit exposure to clients and other banks. The paper adds to the literature and has implications for regulators and standard setters showing that the assessment and disclosure of regulatory capital not only strengthens the soundness and the stability of the international banking system (Basle Committee on banking supervision, 1988), but provides to investors useful information for their future investment strategies.

scholarly journals Multi-Country Study of Bank Credit Risk Determinants

2008 ◽  
Author(s):  
Nor Hayati Bt Ahmad ◽  
Mohamed Ariff
Keyword(s):  
Credit Risk ◽  
Emerging Economies ◽  
Banking System ◽  
Emerging Economy ◽  
Empirical Literature ◽  
Regulatory Capital ◽  
Banking Systems ◽  
Developed Economies ◽  
Management Quality ◽  
Risk Determinants

This paper presents fresh findings about key determinants of credit risk of commercial banks in emerging economy banking systems compared with developed economies. Australia, France, Japan and the US represent developed economies; emerging economies are India, Korea, Malaysia, Mexico and Thailand. Credit risk theories and empirical literature suggest eight credit risk determinants. We find anywhere from two to four factors are alone significantly correlated with credit risk of any one banking system. Regulatory capital is significant for banking systems that offer multi products; management quality is critical in the cases of loan-dominant banks in emerging economies. Contrary to theory or studies, we find leverage is not correlated with credit risk in our test period. Data transformations and statistical corrections ensured these results are reliable: Model robustness was tested using AIC. The model developed here could be applied to test more emerging economy banking systems to generalize our findings to other economies.  

Bankers and politicians: mutual interests and contradictions (the historical experience of different countries)

2018 ◽  
Author(s):  
Ирина Юдина ◽  
Irina Yudina
Keyword(s):  
Political Science ◽  
Political Institutions ◽  
Economic History ◽  
Banking System ◽  
Main Idea ◽  
The Political ◽  
Historical Experience ◽  
Banking Systems ◽  
Analysis Tools ◽  
Political Game

This work is an attempt to explain the political roots from which banking systems have evolved in different countries and how they have evolved at different times. For this purpose, materials and analysis tools from three different disciplines were used: economic history, political science and Economics. The main idea that is set out in this paper is the statement that the strength and weakness of the banking system is a consequence of the Great political game and that the rules of this game are written by the main political institutions.

scholarly journals Assessing the Impact of Corporate Governance Index on Financial Performance in the Romanian and Italian Banking Systems

2021 ◽  
Vol 13 (10) ◽  
pp. 5535
Author(s):  
Marco Benvenuto ◽  
Roxana Loredana Avram ◽  
Alexandru Avram ◽  
Carmine Viola
Keyword(s):  
Corporate Governance ◽  
Financial Performance ◽  
Banking Sector ◽  
Research Question ◽  
Interactive Effect ◽  
Banking System ◽  
Capital Adequacy ◽  
Banking Systems ◽  
Governance Index ◽  
The Impact

Background: Our study aims to verify the impact of corporate governance index on financial performance, namely return on assets (ROA), general liquidity, capital adequacy and size of company expressed as total assets in the banking sector for both a developing and a developed country. In addition, we investigate the interactive effect of corporate governance on a homogenous and a heterogeneous banking system. These two banking systems were chosen in order to assess the impact of corporate governance on two distinct types of banking system: a homogenous one such as the Romanian one and a heterogeneous one such as the Italian one. The two systems are very distinct; the Romanian one is represented by only 34 banks, while the Italian one comprises more than 350 banks. Thus, our research question is how a modification in corporate governance legislation is influencing the two different banking systems. The research implication of our study is whether a modification in legislation, thus in the index of corporate governance, is feasible for two different banking sectors and what the best ways to increase the financial performance of banks are without compromising their resilience. Methods: Using survey data from the Italian and Romanian banking systems over the period 2007–2018, we find that the corporate governance has a significant, positive and long-lasting effect on profitability and capital adequacy in both countries. Results: Taking the size of the company into consideration, the impact of the Index of Corporate Governance (ICG) on a homogenous banking system is positive while the impact on a heterogeneous banking system is negative. Conclusions: Our study provides evidence of the impact of IGC on financial performance and sheds light on the importance of the size of the company. Therefore, one can state that the corporate governance principles applied do not encourage the growth of large banks in heterogeneous banking sectors, thereby suggesting new avenues of research associated with new perspectives.

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